Nonprofit finance, accounting, and tax news. Other tidbits of interest to the charity community.
7 worst international aid ideas are Richard Supart’s nominations for the lousiest ways to help people.
Sending a ton of t-shirts or other clothing items to help the poor, naked, helpless people over there seems like a good idea. Feels good, simple, great pictures, and easy-telling story.
Unfortunately, it is actually quite destructive. T-shirts are at the top of Mr. Supart’s bad idea list:
1. One million t-shirts for Africa
Why is that hurtful?
Have a post at my other blog, Outrun Change, that discusses how government policy at all levels needs to change so it will be easier to move through the massive transition we are seeing throughout the economy.
See How government could make the massive transition in the economy easier.
Federal, state, and local policies could slow down the transition. (Not stop it, just slow it down.) Or those policies could make it easier and quicker to get through the painful transition.
Have a post at my other blog, Outrun Change, describing the power of data-mining. Target is looking at their customer sales database to determine who is in the early stages of pregnancy so those mommies-to-be can start getting coupons for baby stuff.
See Predicting who is expecting by their shopping patterns in the second trimester – the power of data.
Might be a bit weird if you haven’t quite yet announced the good news to everyone.
A post at my other blog, Attestation Update, provides a Twitter policy in 140 words characters that Jay Shepherd developed. Easy to adopt as your policy: A twitter policy short enough to tweet.
He also provides a one paragraph description of how businesspeople can use Twitter. Useful for ministries and churches as well.
Caroline Preston, from The Chronicle of Philanthropy, reports in Watchdogs Zero In on Charity Drug Valuations, that Charity Navigator is floating the idea of asking some charities to restate the last four years of financial statements.
Many NPOs that applied SFAS #157 saw their revenue drop dramatically because of using lower valuation for medicine, especially deworming meds, most specifically mebendazole. (I know, I know, it’s actually ASC 820-10, but my brain still thinks in terms of SFAS numbers when it comes to pre-ASC rules.)
The rating methodology used by Charity Navigator, according to Ms. Preston’s article, penalizes NPOs whose income drops. That means a lot of relief & development NPOs will take a big hit on their ratings.
I don’t have any information beyond the article, so I don’t know what reaction they are getting.
It’s just my guess, but I think they will not get a very good response to their idea. I don’t think NPOs will be at all amused to take this approach.
A: No way.
This is the conclusion of Saundra Schimmelpfennig in her e-book, Lies, White Lies, and Accounting Practices; Why nonprofit overhead doesn’t mean what you think it means
Many people believe that the ratio of supporting services to total expenses is the ideal way to measure the efficiency of a nonprofit organization.
Even at a conceptual level, that is a flawed idea.
At a practical level, Ms. Schimmelpfennig explains it is so easy to play games with the functional allocation that the overhead ratios should be viewed skeptically.
Why doesn’t it feel like the real GDP has recovered from the recession?
Because employment is still in the tank.
Mark J. Perry printed an update to his graph of the GDP and employment numbers at Chart of the Day: Structural Shift in the U.S. Economy. I mentioned this graph earlier.
William P. Barrett just reported that the Better Business Bureau Wise Giving Alliance has asked several dozen large charities how they value deworming meds.
In his article, BBB Asks Charities To Explain Deworming Med Valuations, he says the BBB sent a letter in early January asking for a variety of information, including dollar volume of the meds distributed, number of pills, and the accounting rationale for the valuation that was used.
A few comments and observations are starting to appear about the IRS audit of Food for the Hungry. Here are a few I’ve seen:
It’s not just two big-time reporters and this teeny-tiny blog looking at the mebendazole issue anymore.
It is now obvious that the IRS has been paying attention for quite some time. On Monday their involvement hit the papers.
Two articles appeared:
William P. Barrett, from Forbes magazine, posted IRS Audit: Big Charity Filed Misleading Tax Return
Caroline Preston, of The Chronicle of Philanthropy posted IRS Levies Fine on Food for the Hungry Over Drug Valuations.
If you have any interest in the issue of valuing GIK meds, you will want to read both articles.
The Chronicle of Philanthropy has a superb graphic that shows the amount of donated mebendazole deworming medicine recorded as contributions in the financial statements of three NPOs before and after applying the change in valuation required by SFAS #157:
Previously I’ve discussed the impact of new accounting rules on valuing of deworming medicine. Have been looking at Feed the Children financial statements to quantify the impact.
I am not picking on Feed the Children.
I’m using their 2010 financial statements because they have the best disclosures in their financial statements that I’ve seen for the impact, plus there is public information on what per-pill valuation amounts they have been using. It is to their credit that they have this amount of background available in their financial statements.
It is my guess, just a guess, that the same underlying valuation issues and impact on supporting services ratio that I have described previously here and here, would also be present in the financial information for other organizations that have large volumes of deworming medicine. If I can find good info, I’ll do some calculations on other sets of financials.
I have a few more observations and then one more set of calculations.
On January 28, 2002 I hung out my shingle as a one-person CPA firm. Ten years ago!
That was an exciting and thrilling step for me. I’ve never had as much fun in my professional life as I have in the last decade.
My hope is that I’ve helped many organizations in the religious non-profit community improve their accounting and accountability.
I’m looking forward to many more years serving the non-profit community. Looking forward to serving the CPA community as well. Also looking forward to having even more fun – the next decade will be better than the last!
For quite a while now I’ve been fascinated by the rapid increase in oil production in the Bakken field in North Dakota.
Have had a lot of posts on my blog Outrun Change. Under 1% unemployment in one county. Production graphs that are going vertical. More oil produced in ND than California. That kind of stuff.
This month my interest level took off like those oil production charts.
In Toxic Charity – How Churches and Charities Hurt Those They Help (and How to Reverse It), Robert Lupton describes the harmful unintended consequences of the way we usually do charity.
In 1981, he moved into the neighborhood where he was serving. On Christmas Eve, he was visiting the home of some new friends.
Mom, dad, and the kids were anxiously awaiting visitors. There was one strand of lights on the small artificial tree in the corner. The nicely dressed people from the suburbs arrived with armfuls of nice presents wrapped so pretty.
In the midst of the unwrapping, the father slipped out of the house. Later one of the kids asked where he was. Mom said he had to go to the store.